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functions, lack depth - depth of motivation, depth of reflection,
depth of commitment to ideals. Amartya Sen has suggested that the
current generation of economists, in squeezing down the richer for–
mulations of forebears like Smith, Marshall, and Knight to fit their
formal requirements, have succeeded in making "molehills out of
mountains." Economics is of course not psychoanalysis, and econo–
mists understandably worry that embracing these complexities will
cause their studies to lose generality and detachment. The impor–
tance of the work described below lies in showing that it is possible
for economists to move at least some distance into these depths with–
out sinking.
*
*
Consider first Thomas Schelling. Schelling's past work on stra–
tegic interactions among individuals and groups has left an enduring
mark on economics and social theory. This
strategic
element is pres–
ent whenever one actor's best "move" depends on how his counter–
parts act, and that the actor is aware that his counterparts see things
the same way.
The quintessential modern example of such strategic interac–
tion is the nuclear arms race, and Schelling's early analyses of the
dilemmas of deterrence in
The Strategy of Conflict
formed the founda–
tion of the academic subject "strategic studies." But Schelling was
also the first to see clearly that these strategic elements can arise not
just when there is conflict, but also when people simply want to coor–
dinate their activities. A characteristic Schelling example: you are to
meet your friend in New York at an appointed day and time. But re–
grettably you and your friend neglected to agree on a meeting place ,
and now she is out of touch. Can you think of the place your friend
will guess, knowing that she is trying to guess the place you will
think of? The answer, revealingly, will depend on the history of your
relationship, but, lacking a special history, you and your friend
(with a little luck) will both wind up under the clock in Grand Cen–
tral Station. What happens when there is a lack of coordination?
Each person may want the freedom to move about as he pleases,
with his automobile, free of the constraints of railroad or airline.
Yet, when all go out at the same time (morning or evening), there is
congestion, which is paid for by each individual, unwillingly, in
idling time. More generally, neoclassical theory assumes that all
